The Post's Aug. 7 editorial, "D.C.'s Numbers Game," asserts that the dispute concerning the District's estimated year-end financial condition is really focusing on minuscule differences between the District's budget and actual revenues, and that the city has made significant progress in the area of fiscal management. It cites last year's turnaround from an estimated $60 million deficit to a $68 million surplus.
But the recent controversy surrounding D.C.'s 1982 fiscal picture indicates that the real issue is not whether the revenue estimates of Mayor Marion Barry or the independent auditor are correct. The real issues are whether we will have total disclosure and explanation of the city's financial condition and adequate financial planning. The real issues are the city government's openness and credibility.
The controversy began with Councilman John Wilson's July 9 forecast that the District was likely to end FY 1982 with a significant deficit. His comments were based on the May revenue report, which the city released on June 16 and which showed revenue shortfalls in various areas. Despite the fact that the current administration had the May figures almost four weeks before Wilson made his statement, and must have known of a possible revenue shortfall, it had not made any real disclosure or explanation of possible shortfalls.
Responding to Wilson, the mayor confidently predicted that he would be proven wrong; the director of finance and revenue estimated that the shortfalls would be outweighed by increased income tax collections for the last quarter. In other words, there would be no overall shortfall.
Within two days, however, the June figures became public, indicating that the shortfall already had grown to $12.9 million. The mayor now conceded a possible $6 million shortfall, prompting the question of whether such a possibility would have been disclosed without Wilson's comments. The city administrator boldly stated that the city did have a contingency plan to deal with the possible revenue shortfall, but stated he was "not ready to reveal it . . . now." He indicated that the city was controlling expenditures by "leaving positions vacant," but denied there was a freeze. The next day, however, he stated that the city was "filling only essential positions.. . ."
Then, while still denying that a deficit was possible, city officials suddenly indicated that they would use $10 million set aside to retire the long-term debt to meet any revenue shortfall. Congressional staff sources reported that a congressional hearing on the city's finances would be delayed until after the September primary to avoid any discussion of the city's finances that might hurt the mayor's re-election effort. But the city still had not revealed its purported contingency plan.
Within days, the city administrator announced that the city would end the year with a $3.3 million surplus. Although he finally admitted that there would be a $5 million revenue shortfall, he insisted it would be more than offset by savings resulting from, among other things, a cut in Metro service and the elimination of certain bus routes. The matter rested there until the independent auditor's report on the June figures estimated a $17 million revenue shortfall for FY 1982.
The Post's editorial correctly observed that revenue estimating is a complicated and highly uncertain science. The recent controversy still leads, however, to several inescapable conclusions:
1. The current administration does not make adequate disclosure or provide adequate explanation to the city council, Congress or the public of the city's financial condition.
It acts as if the figures necessary to a complete picture of the city's financial condition are state secrets and as if we should be shielded from a comprehensive explanation of D.C.'s financial condition. The revenue figures provided to the council are contained in a bare-bones report that provides virtually no explanation of the city's estimates. Equally important are grant collections from the federal government, the status of which is almost anybody's guess. And a clear understanding of D.C.'s financial condition certainly requires an accurate picture of agency spending, something that the city seems incapable or unwilling to disclose to the public at large.
2. The current administration is reacting to problems rather than anticipating them.
Revenue estimates are just that -- estimates. No one is blaming the mayor because a beginning-of-the-year estimate may turn out to be 1 percent too high or too low. But what we can demand is a recognition, at the beginning of the fiscal year, that adequate contingency planning is needed to deal with potential shortfalls. Even assuming the existence of a $10 million contingency plan, however, such a contingency plan would be inadequate. It represents only approximately 2 1/2 days of agency spending. We cannot run the city on an exact change basis. The city minimally should provide a contingency reserve sufficient to cover approximately one city payroll and develop a real contingency plan. Then we can eliminate the mad dash at the end of the fiscal year to cover shortfalls, and perhaps accumulate funds to retire the accumulated deficit.
Furthermore, the public should be involved in the development of the contingency plan, since citizen involvement in the budget process is a sham if, as soon as revenues appear to be falling somewhat short of estimates, the city implements a so-called contingency plan in which the public has had no involvement.
3. The District has lost substantial credibility because of the administration's erratic behavior in fiscal management. In FY 1980, the city's deficit exceeded $100 million, its highest ever. Theenext year, the mayor forecast, well into the fiscal year, a $60 million deficit. He then RIFfed hundreds of city employees, and reduced, with little planning for the city's long-run needs, essential city services. Later, the city suddenly and almost inexplicably announced a $68 million surplus, principally resulting from increased revenues. This surplus should not obscure the fact that in the eyes of the RIFfed employees, of the citizens whose services were reduced and of the bankers and others who will determine the city's ability to lift itself out of its long- term fiscal quagmire, the District's behavior was at best erratic. When projections well into the fiscal year turn out to be $120 million off the mark, the public has every right to be skeptical of the budget process.